As the Senate reconvenes this week to consider the president's economic plan, the first order of business should be dropping the Btu tax. Nightmarishly complicated, this brand new levy on energy would inflict more harm than the money it would raise is worth.
A Btu is a British thermal unit, a measurement of the heat-producing power of fuel. The tax, as it emerged from the House of Representatives, would be levied on gasoline, diesel, heating oil, residual fuel oil, natural gas, coal, hydroelectric power and nuclear power, at numerous different rates, minus 14 exemptions. Diesel alone would be taxed at five rates and must be dyed several different colors. The rate for utilities would float from month to month, depending on the mix of coal, oil, gas and other fuels used to produce the previous four weeks' electricity. The tax would be variously collected from utilities, refineries, pipelines and consumers. In some cases it would piggyback on existing federal excise taxes; in others a new collection track would be needed.Distaste for complexity in taxes is no mere prejudice. Convolutions translate into unproductive administrative costs - i.e., waste. Former Carter administration economist Philip Verlager projects administrative overhead at up to a scandalous 20 percent of the Btu tax's total take.
Complexity frustrates citizens and feeds resentment of government. This tax's worst defect, however, is its counterproductive effect on the economy and deficit.
The point of the Clinton plan is to spur employment while placing the deficit on a downward course. But the Btu tax would burden the economy and force new federal spending.
The cost of doing business will rise throughout the economy. Not only manufacturers and service providers but also local, state and federal governments would pay more for transportation and power. Every household that drives a car or uses heat or electricity would see its expenses rise - by about $450 a year for the average family.
In reaching its optimistic estimate of $71 billion in revenues from the tax over five years, the administration made some allowance for the tax's depressing effect on corporate profits and wages. Scripps Howard News Service notes that responsible projections of job losses are in the 300,000 to 600,000 range.
In addition, however, the energy tax would push up prices generally. This would hamper American exports - and, worse, it would fuel entitlement spending, since millions of federal retirement and other benefits are indexed for inflation.
So is the tax itself, incidentally: After 1998 the Btu tax rate would automatically rise with inflation. Unless, of course, the senators see fit to shrink the deficit some less destructive way.